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INVENTORY MANAGEMENT

If both the lead time and daily demand are constant (no variation), the ROP is equal to:

 Daily demand times lead time.
 Safety stock
 Expected demand plus safety stock.
 Expected demand minus safety stock.

The goal of ABC analysis is to

 determine the profitability of items.
 to identify the A items for better inventory control.
 estimate dollar value per pound.
 estimate average volume per dollar value.

The Basic EOQ model ignores:

 Ordering costs
 A items
 Purchasing costs
 B and C items
 Holding costs

Most inventory models are made based on:

 Minimizing lead time
 Profit maximization
 Optimum influence on demand
 Minimizing setup times
 Cost minimization

The difference(s) between the basic EOQ model and the production order quantity model is (are) that

 A. the EOQ model does not require the assumption of known, constant lead time.
 there are no holding costs in the production order quantity model.
 the production order quantity model does not require the assumption of known, constant demand.
 the production order quantity model does not require the assumption of instantaneous delivery.

Fixed-order quantity models are:

 Time triggered
 Event triggered
 Made up of a variable order size
 Fixed for a specified time period

Space considerations are not included in any of the economic ordering models.

 True
 False

In the basic fixed-order quantity model, if annual demand doubles, the effect on the Optimal Order Quantity (EOQ) is:

 it is half its previous amount
 it increases by about 40%
 it is about 70% of its previous amount
 it doubles
 decreases by a factor of 2

ABC analysis divides an organizations on-hand inventory into three classes based upon

 annual demand.
 annual dollar volume.
 unit price.
 the number of units on hand.

If the production rate in an economic production lot size model is very much larger than the consumption rate, the results are practically the same for economic production lot size and EOQ.

 True
 False

Extra units that are held in inventory to reduce stockouts are called

 safety stock.
 demand variance.
 just-in-time inventory.
 reorder point.

Which one of the following statements concerning the economic order quantity (EOQ) model is TRUE?

 Annual holding cost, annual purchasing cost and annual delivery costs are the relevant costs in the
 Partial receipts are allowed.
 Uncertainty in leadtime may not exist.
 Quantity discounts can occur and taken into account in the total cost calculations.

With the quantity-discount model, an order level might not be at a minimum point of a total cost curve.

 True
 False

Which of the following inventory systems would be most appropriate in controlling many items ordered from the same vendor?

 One Period Inventory Model Using Marginal Analysis
 Fixed Time Period System
 Materials Requirements Planning System
 Fixed Order Quantity System

Which of the following is NOT a type of inventory?

 raw material
 MRP
 finished goods
 work-in-process

Reorder point models are primarily used for independent demand items.

 False
 True

Policies based on ABC analysis might include investing

 more in inventory security for C items.
 extra care in forecasting for C items.
 more in supplier development for A items.
 the most time and effort verifying the accuracy of records for B items.

A system that triggers ordering on a uniform time basis is called a

 reorder point system.
 fixed-quantity system.
 EOQ.
 fixed-period system.

One use of inventory is

 to tightly link a firm s production with its customer s demand.
 to provide a hedge against inflation.
 to tightly link production and distribution processes.
 to ensure that item cost is maximized.

In the basic Q model, if the lead time doubles, the EOQ will:

 remain the same
 double
 decrease by half
 none of the above
 increase, but not double

Which one of the following statements is best?

 A fixed interval system requires more safety stock than a ROP system.
 In a fixed interval system, the value of Q is kept the same from one cycle to another.
 A fixed interval system requires more administrative control and computer support than does a ROP sy
 A fixed interval system lends itself more to quantity discounts than does a ROP system.

In a two-bin inventory system, the amount contained in the second bin is equal to the:

 safety stock
 ROP
 amount in the first bin
 EOQ
 optimum stocking level

Inventory record accuracy would be decreased by

 ABC analysis.
 increasing stockroom accessibility.
 cycle counting.
 reorder points.

Monitoring the temperature of tomatoes during shipment would best be done using:

 GPS
 Universal Product Codes (UPC)
 RFID tags
 ROP
 Bar codes.

A firm producing medical equipment to customer specifications is most likely using a

 make-to-stock strategy.
 make-to-order strategy.
 assemble-to-order strategy.
 mass production strategy.

The two most important inventory-based questions answered by the typical inventory model are

 when to place an order and how many of an item to order.
 how many of an item to order and what is the cost of this order.
 when to place an order and what is the cost of the order.
 how many of an item to order and with whom the order should be placed.

For a company that manufactures most of its products as standards, more inventory should be placed

 closer to the customer.
 equally distributed between the plants and warehouses.
 close to suppliers.
 within the plant as work-in-process.

What items do students typically buy on an ROP basis?

 bran muffins
 textbooks
 wedding gifts
 computer software
 gasoline for car